General Obligation Bond
What Is a General Obligation Bond?
A general obligation bond (GO bond) is a municipal bond backed by the full taxing authority of a state or local government. These bonds are used to finance public projects such as schools, parks, and infrastructure.
Unlike revenue bonds, repayment does not rely on a specific project’s income.
Why It Matters
Because they are supported by government taxation power, general obligation bonds are often considered safer than other municipal bonds.
They provide governments with a way to finance public improvements.
How General Obligation Bonds Work
Governments issue GO bonds and repay investors using general tax revenue.
Sources of repayment may include:
- property taxes
- sales taxes
- other government revenues
Investors receive regular interest payments and principal repayment at maturity.
Example
A city may issue general obligation bonds to build a new public school.
General Obligation Bond vs Revenue Bond
- General obligation bonds are backed by tax revenue.
- Revenue bonds are repaid from income generated by a specific project.
FAQs About General Obligation Bonds
Are GO bonds safe investments?
They are generally considered lower risk than many other municipal bonds.
Who issues general obligation bonds?
State and local governments.
What projects do GO bonds fund?
Public infrastructure such as schools and community facilities.
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